Blogging Break

I will be taking a blogging break next week, July 2-6.  Meanwhile, take a look at my new book Patent Wars:  How Patents Impact Our Daily Lives, which comes out in hardcover on Monday, July 2, as well as my blog post about the book on the OUP Blog, which also goes live on Monday.   

Friday Miscellany: A $400 Million Verdict in Texas, Damages and Injunctions in China, and More

1.  Many readers probably are aware of this already, but two weeks ago a jury in the Eastern District of Texas returned a verdict in favor of KAIST IP against Samsung in the amount of $400 million.  The jury also concluded that Samsung willfully infringed, thus potentially opening the door to enhanced damages.  Story on Bloomberg News here, copy of the jury verdict here.

2.  On Trust in IP, Yangjin Li published a post titled Latest status and trend of patent litigations in China.  The post discusses a report prepared by IPHOUSE providing data on the number of patent cases filed in China, the duration of proceedings, and so on, and concludes with some statistics on damages:

Compared to the past, the damages awarded by the Chinese courts in patent infringement cases have increased significantly in the last few years. The report records a so far highest damage for patent infringement of over 80 million yuan (10.6 million Euro), which was ordered in 2017 in a case between Huawei and Samsung. However, according to the report, the average amount of damage awarded in all the patent civil cases with published decisions from 2013 to 2017 is still just about 102,000 yuan (13,500 Euro), wherein the average amount is about 443,000 yuan (58,700 Euro) if counting invention patents only.

One reason for the relatively low damages may be the fact that statutory damages have been awarded in most cases. As shown in the report, statutory damages have been awarded in 188 out of 227 top cases in Beijing, Shanghai and Guangdong. . . .

 Highly recommended.

3.  Also in this vein, Mark Cohen published a post on the China IPR Blog titled Reviewing the 2017 SPC Report on IPR Judicial Protection:  The Generalities and the Exceptions, summarizing the Supreme People's Court 2017 Report on the Situation Regarding Judicial Enforcement of IPR in China.  There were 16,010 first-instance patent cases filed in China in 2017 (presumably this includes not only invention patents but also utility models and design patents).  Interesting to hear that China is considering implementing a specialized IP appellate court.

4.  Clifford Chance's Global Intellectual Property Newsletter SEP/FRAND and Other IP Topics (Issue 06/18) is available here and contains articles by Claudia Milbradt titled Germany:  Update on the Latest Decisions by German Courts Regarding FRAND/SEP; by Miquel Montañá, titled Spain:  The Latest European Commission Guidance on FRAND Licensing of SEPs; and by Jill Ge, titled China:  Huawei v. Samsung--FRAND Litigation in China.

5.  Finally, for further commentary on the U.S. Supreme Court's WesternGeco opinion on damages and extraterritoriality, see these posts from Tim Holbrook, Michael Risch, Gene Quinn, and Gene & Renee Quinn.  The IP Chat Channel also will be hosting a webinar on the case soon; I'll provide details when I have them.  For my post on the case, see here.

Apple and Samsung Settle Their Design Patent Dispute

Here is a copy of the Joint Notice of Settlement and Stipulation of Dismissal with Prejudice, and here is a copy of the Proposed Order of Dismissal.  For discussion, see articles on Bloomberg, Law360, Reuters, and The Verge.

U.K. Update: Marshall on Accounts of Profits, Radcliffe on Awards of Costs

1.  Joshua Marshall has published an article titled Account of Profit for Infringement of Intellectual Property Rights, 40 EIPR 260 (2018).  Here is the abstract:

This article discusses the remedy of an account of profit awarded at the election of a claimant who successfully pleads infringement of their intellectual property rights. This article will sketch out the essential remedies available where intellectual property rights have been infringed and the fundamental differences between them. This article will then turn to consider the causes of action for which an account of profit is available and the relevant obligations and rights at play. This article then attempts to rationalise the remedy where intellectual property rights have been infringed. It is submitted that, in this context, the remedy is a personal, rather than proprietary, right to disgorge the profit made by the tortfeasor in committing the wrong. 

Mr. Marshall also has published a comment titled OOO Abbott v Design & Display Ltd:  Account of Profits for Patent Infringement, 40 EIPR 329-33.  Here is the abstract: 

In proceedings for patent infringement, once liability has been established a successful claimant will often be permitted to elect between compensatory damages or an account of the profits made by the defendant. The defendant need only account for net profits, not gross turnover, meaning that overheads should be deducted. This raises the question of what overheads can be  deducted and in what proportion. The court has grappled with these issues throughout these proceedings. After four years of litigation over the correct quantum of the remedy, the value of the defendant’s profit has been determined to be nil.

For previous discussion on this blog of earlier proceedings in this matter, see here,  here, and here.
 

2.  Jonathan Radcliffe has published an article titled Unregistered Patent Transaction?  Even in Win, That'll Cost You in Bloomberg BNA's World Intellectual Property Report.  As in the U.S., a party to an assignment of patent rights may, but not is required, to record the assignment with the Patent Office.  There are some obvious third-party benefits, however, from knowing whether a patent initially granted to one person has been transferred to another; and so English law attempts to encourage the recordal of such a transfer by providing, in section 68 of the Patent Act, that:

Where by virtue of a transaction, instrument or event to which section 33 above applies a person becomes the proprietor or one of the proprietors or an exclusive licensee of a patent and the patent is subsequently infringed, before the transaction, instrument or event is registered, in proceedings for such an infringement, the court or comptroller shall not award him costs or expenses unless -

(a) the transaction, instrument or event is registered within the period of six months beginning with its date; or

(b) the court or the comptroller is satisfied that it was not practicable to register the transaction, instrument or event before the end of that period and that it was registered as soon as practicable thereafter.

Mr. Radcliffe discusses a recent case, L'Oreal v. RN Ventures, [2018] EWHC 391, in which the Patents Court awarded L'Oreal S.A. (the exclusive licensor) and L'Oreal U.K. (the exclusive licensee) only partial costs (covering the post-registration period) for not having recorded the license until after the two had filed suit for infringement. As Mr. Radcliffe notes, "This section now has judicial teeth."

Reminder: IP Chat Channel Webinar on Willfulness Later Today

Just a reminder that later today, from 2-3 p.m. Eastern Time, the IP Chat Channel will be presenting a webinar titled Willfulness Since Halo.  I will be one of the speakers.  Here is a link.

Three New Papers on SEPs

1.  Peter Picht has posted a paper on ssrn titled FRAND Determination in TCL v. Ericsson and Unwired Planet v. Huawei:  Same Same but Different?.  Here is a link to the paper, and here is the abstract:

Unwired Planet/Huawei (UK) and TCL/Ericsson (US) are remarkable rulings on the FRAND-licensing of SEPs, not least because they tackle the task of a full-blown FRAND-royalty determination. Equally remarkable is a comparison between them since the two courts looked – it seems – at a similar set of facts but reached quite different results. The present paper focusses on a key reason for these differing outcomes, namely the courts’ treatment of “top-down” and “Comparables”, two core approaches in FRAND royalty calculation. It argues, i.a., that it creates more problems than solutions to treat the public announcement of royalty rates as a “pledge”; that FRAND commitments made under EU (Member State) law and regarding EU patents ought to be interpreted with a view to EU law; that the two courts interpret the “ND”-requirement differently; and that the weighing and adjusting of Comparables may be distortive. As to the relative importance of the calculation approaches, Comparables seem more relevant regarding the facts at issue.

2.  Kirti Gupta and Georgios Effraimidis have posted a paper on ssrn titled IEEE Patent Policy Revisions: An Empirical Examination of Impact.  Here is  a link, and here is the abstract: 

In February 2015, the Institute of Electrical and Electronics Engineers-Standards Association (IEEE-SA) -- one of the largest Standards Development Organizations (SDOs) -- adopted highly controversial changes to its intellectual property rights (IPR) policy. Specifically, the IEEE-SA introduced a specific definition of Fair, Reasonable and Non-Discriminatory (FRAND) licensing terms. The updated policy rules and the position of the Department of Justice (DoJ) -- stated in a Business Review Letter (BRL) -- have attracted much discussion from academic scholars and industry practitioners.

The aim of this paper is to explore how the new patent policy has impacted different aspects of standards development within IEEE. Particularly, our analysis focuses on the IEEE 802 LAN/MAN Standards Committee (IEEE 802 LMSC), whose Working Groups (WGs) have been responsible for the design and development of widely used wireless technologies such as Wi-Fi and Ethernet. The first part of the analysis examines the submission pattern of Letters of Assurances (LoA), i.e., documents outlining the declaration of patents potentially essential to the standard (commonly referred to as Standard Essential Patents (SEPs)) and terms under which the submitter is willing to license its SEPs. We examine LoA submissions before and after the implementation of the new policy within the 802.11 WG, which covers the Wi-Fi technology. Next, we analyze how the comment resolution process (CRP), that is, the process of resolving comments made by 802.11 voters has changed after the policy update. More specifically, we investigate whether there is a delay in the approval process of 802.11 standards. Finally, we examine how the number of submitted Project Authorization Requests (PARs), or documents that trigger the development or revision of a standard by defining the scope and requirements for a new technical project across all IEEE 802 WGs, has changed after the policy update. PARs can be used as a proxy of new activity related to the development of standards.

The empirical findings suggest a decline in LoAs with several SEP holders reluctant to license under the new IPR policy terms. More importantly, uncertainty on implementers’ side has increased, as new standards have been approved under the presence of negative and/or missing LoAs, and other standards are being developed under this “mixed bag” of LoAs. The CRP analysis reveals that the first two rounds of the process last on average longer after the policy change. Such a finding implies that the 802.11 balloting process has become more time consuming, which in turn results in a (potential) delay of approval/publication of standards. We also find that the number of new projects initiated (or PARs) in the IP-intensive IEEE standards (namely the 802 WGs) have decreased, suggesting a potential slowdon of the growth rate of innovation after the policy change.

3.  J. Gregory Sidak has published a paper titled The FRAND Contract, 3 Criterion Journal on Innovation 1 (2018). Here is a link to the paper, and here is the abstract:

Government agencies in various countries have issued guidelines to facilitate private negotiation to license the use of standard-essential patents (SEPs) that a patent holder has voluntarily committed to a standard-setting organization (SSO) to offer to license on fair, reasonable, and nondiscriminatory (FRAND) terms (or on reasonable and nondiscriminatory (RAND) terms, as the case may be) to a third-party seeking to implement the standard. In effect, these jurisdictions are competing in a tournament of sorts to identify the best legal framework for resolving FRAND licensing disputes. A leading candidate is the existing body of U.S. contract law.

In this article, I examine the FRAND licensing of SEPs through the lens of U.S. contract law. I will eschew the phrase “FRAND commitment” in favor of the bulkier but more precise phrase “the FRAND contract between the SEP holder and the SSO.” That terminology helps to clarify that the license agreement potentially formed between the SEP holder and the implementer on FRAND terms is a separate, subsequent contract that is entirely distinct from the preexisting contract into which the SEP holder and the SSO have entered.

I begin by asking in Part I whether the FRAND contract is enforceable. U.S. courts have found that it is, yet commentators, courts, and other tribunals have flagged various theories of unenforceability when analyzing a FRAND commitment as a contract.

In Part II, I analyze the anatomy of the FRAND contract, as informed by first principles of U.S. contract law. Whether, with respect to a given implementer, a given SEP holder has discharged its FRAND duty to the SSO turns on whether the SEP holder has offered to license its SEPs to that implementer on FRAND terms. An implementer loses its rights as a third-party beneficiary of the SEP holder’s FRAND contract with the SSO if the third-party beneficiary rejects a FRAND offer or if it fails to accept that offer within a reasonable time. By underscoring the applicability of these fundamental principles of U.S. contract law, judges, arbitrators, and other decision makers would encourage both the SEP holder and the implementer to avoid dilatory tactics and orthogonal bargaining positions when negotiating license terms for the use of SEPs.

In Part III, I examine some of the frameworks that other countries have recently proposed for guiding negotiations for SEPs. Although these frameworks supposedly identify principles that would facilitate the license negotiation between an SEP holder and an implementer of an industry standard, they ignore the relevance of first principles of contract law. Instead, they try to reinvent the wheel—by fashioning a sui generis bargaining protocol for SEP license negotiations that ignores the transactional efficiency of preexisting contract principles of offer and acceptance. These proposals are unlikely to be more efficacious than U.S. contract jurisprudence in defining a clear protocol that encourages the expeditious execution of bilaterally negotiated FRAND licenses.

In Part IV, I offer preliminary observations on how a given SEP holder and a given implementer might agree to opt out of the FRAND contract so as to create a superior structure for concluding their bilateral negotiation of a license or, in the event of an impasse, for achieving a more expeditious and cost-effective resolution of their dispute.

WesternGeco v. ION: Analysis

Again, here is a link to the opinion (majority opinion by Justice Thomas; dissent filed by Justice Gorsuch, joined by Justice Breyer).  From the opinion:

Under the Patent Act, a company can be liable for patent infringement if it ships components of a patented invention overseas to be assembled there. See 35 U.S.C. § 271(f)(2). A patent owner who proves infringement under this provision is entitled to recover damages. § 284.The question in this case is whether these statutes allow the patent owner to recover for lost foreign profits. We hold that they do (p.1).

The majority opinion centers on the Supreme Court's extraterritoriality analysis, although it does also reiterate, as past decisions have done, that § 284 is intended to provide "full compensation" for the infringement.  (The Court expressly decides not to "address the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases" (p.9 n.3).  I expected the Court would address that issue, and I think it should have.)  Basically, the Court concludes that the conduct that § 271(f)(2) addresses is domestic, and thus that § 284 should be read as providing full compensation for that act of domestic infringement.  Here are some of the key excerpts from what is a fairly short opinion:

This Court has established a two-step framework for deciding questions of extraterritoriality. The first step asks “whether the presumption against extraterritoriality has been rebutted.” RJR Nabisco, Inc. v. European Community, 579 U. S. ___, ___ (2016) (slip op., at 9). It can be rebutted only if the text provides a “clear indication of an extraterritorial application.” Morrison v. National Australia Bank Ltd., 561 U.S. 247, 255 (2010). If the presumption against extraterritoriality has not been rebutted, the second step of our framework asks “whether the case involves a domestic application of the statute.” RJR Nabisco, 579 U.S., at ___ (slip op., at 9). Courts make this determination by identifying “the statute’s ‘focus’” and asking whether the conduct relevant to that focus occurred in United States territory. Ibid. If it did, then the case involves a permissible domestic application of the statute. See ibid.

We resolve this case at step two. While “it will usually be preferable” to begin with step one, courts have the discretion to begin at step two “in appropriate cases.” See id., at ___, n.5 (slip op., at 10, n.5) (citing Pearson v. Callahan, 555 U.S. 223, 236–243 (2009)). . . .

Under the second step of our framework, we must identify “the statute’s ‘focus.’” RJR Nabisco, supra, at ___ (slip op., at 9). The focus of a statute is “the objec[t] of [its] solicitude,” which can include the conduct it “seeks to ‘regulate,’” as well as the parties and interests it “seeks to ‘protec[t]’” or vindicate. Morrison, supra, at 267 (quoting Superintendent of Ins. of N. Y. v. Bankers Life & Casualty Co., 404 U.S. 6, 12, 10 (1971)). “If the conduct relevant to the statute’s focus occurred in the United States, then the case involves a permissible domestic application” of the statute, “even if other conduct occurred abroad.” RJR Nabisco, 579 U.S., at ___ (slip op., at 9). But if the relevant conduct occurred in another country, “then the case involves an impermissible extraterritorial application regardless of any other conduct that occurred in U.S.territory.” Ibid. . . .

Applying these principles here, we conclude that the conduct relevant to the statutory focus in this case is domestic. We begin with § 284. It provides a general damages remedy for the various types of patent infringement identified in the Patent Act. The portion of § 284 at issue here states that “the court shall award the claimant damages adequate to compensate for the infringement.” We conclude that “the infringement” is the focus of this statute. As this Court has explained, the “overriding purpose” of § 284 is to “affor[d] patent owners complete compensation” for infringements. General Motors Corp. v. Devex Corp., 461 U.S. 648, 655 (1983). “The question” posed by the statute is “‘how much ha[s] the Patent Holder. . . suffered by the infringement.’” Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 507 (1964). Accordingly, the infringement is plainly the focus of § 284.

But that observation does not fully resolve this case, as the Patent Act identifies several ways that a patent can be infringed. See § 271. To determine the focus of § 284 in a given case, we must look to the type of infringement that occurred. We thus turn to § 271(f)(2), which was the basis for WesternGeco’s infringement claim and the lost-profits damages that it received. . . .

Section 271(f)(2) focuses on domestic conduct. It provides that a company “shall be liable as an infringer” if it“supplies” certain components of a patented invention “in or from the United States” with the intent that they “will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States.” The conduct that § 271(f)(2) regulates—i.e., its focus—is the domestic act of “suppl[ying] in or from the United States.” . . .

In sum, the focus of § 284, in a case involving infringement under § 271(f)(2), is on the act of exporting components from the United States. In other words, the domestic infringement is “the objec[t] of the statute’s solicitude” in this context. Morrison, 561 U. S., at 267. The conduct in this case that is relevant to that focus clearly occurred in the United States, as it was ION’s domestic act of supplying the components that infringed WesternGeco’s patents. Thus, the lost-profits damages that were awarded to WesternGeco were a domestic application of § 284 (pp. 5-8).

So, suppose we have a replay of Power Integrations or Carnegie-Mellon.  The infringing conduct at issue is a manufacture, use, or sale that occurs in the United States, in violation of § 271(a), but which triggers a chain of events resulting in (1) the U.S. patent owner losing a sale to the defendant in another country, or (2) the defendant obtaining higher profits on the sales it makes in another country.  Is the U.S. patent owner entitled to its lost profit in case (1), or a higher reasonable royalty in case (2), as long as the causal chain is not too remote--that is, as long as the sales the defendant made abroad were proximately caused by the infringement?  As I've noted previously, I've come around to the view that the answer is yes, and I'm inclined to read Justice Thomas's statements as quoted above as supporting that result.  He says that the "focus" of § 284 is "the infringement," and that § 284 is intended to provide "full compensation" for such infringement; and  § 271(a) defines infringement as the unauthorized domestic manufacture, sale, or use of the patented invention.  In other words, "the conduct relevant to" § 284's "focus" is domestic conduct, and as long as that is so § 284 provides for full compensation for the harm flowing from that domestic conduct (subject, surely, to normal proximate cause limitations, even if the Court stubbornly refuses to address that topic).  So there's no need to fret about whether whether the presumption against extraterritoriality applies, I guess.

In dissent, Justice Gorsuch actually agrees that "WesternGeco's lost profits claim does not offend the judicially created presumption against the extraterritorial application of statutes."  Nevertheless, he argues that the Patent Act itself does not "permit awards of this kind" because "[a] U.S. patent provides a lawful monopoly over the manufacture, use, and sale of an invention within this country only," and "WesternGeco seeks lost profits for use of its invention beyond our borders" (dissent p.1).  But I think Justice Thomas has the better of the argument here, when he states in the majority opinion that this "position wrongly conflates legal injury with the damages arising from that injury" (majority opinion p.9).  And I'm not convinced by Justice Gorsuch's parade of horribles, for example this:

Suppose a company develops a prototype microchip in a U.S. lab with the intention of manufacturing and selling the chip in a foreign country as part of a new smartphone. Suppose too that the chip infringes a U.S. patent and that the patent owner sells its own phone with its own chip overseas. Under the terms of the Patent Act, the developer commits an act of infringement by creating the prototype here, but the additional chips it makes and sells outside the United States do not qualify as infringement. Under WesternGeco’s approach, however, the patent owner could recover any profits it lost to that foreign competition—or even three times as much, see § 284—effectively giving the patent owner a monopoly over foreign markets through its U.S. patent. That’s a very odd role for U.S. patent law to play in foreign markets, as “foreign law alone, not United States law,” is supposed to govern the manufacture, use, and sale “of patented inventions in foreign countries.” Microsoft, supra, at 456 (dissent pp. 7-8).

I have a hard time imagining the initial act of manufacturing the infringing prototype in the U.S. as being the proximate cause of all of the infringer's sales abroad.  And what about the noninfringing alternative of manufacturing the prototype in a country where it isn't patented (a point the Solicitor General made in his brief, as I recall)?  That would seem to eliminate most of the damages resulting from the foreign sales, I should think.

Justice Gorsuch also worries that other countries will follow suit:

Worse yet, the tables easily could be turned. If our courts award compensation to U.S. patent owners for foreign uses where our patents don’t run, what happens when foreign courts return the favor? Suppose our hypothetical microchip developer infringed a foreign patent in the course of developing its new chip abroad, but then mass produced and sold the chip in the United States. A foreign court might reasonably hold the U.S. company liable for infringing the foreign patent in the foreign country. But if it followed WesternGeco’s theory, the court might then award monopoly rent damages reflecting a right to control the market for the chip in this country—even though the foreign patent lacks any legal force here (dissent p.8).

I suppose that's a risk--but for that matter, other countries could interpret their patents as having extraterritorial force altogether, if they wanted to.  But they won't.  If proximate cause and analysis of noninfringing alternatives would limit the damages available for most of the losses occurring outside the U.S., the practical consequences of WesternGeco won't be so far-reaching, and won't provoke such a far-reaching response from other countries. 

U.S. Supreme Court Reverses in WesternGeco

Opinion here.  I'll be back shortly with analysis.

IP Chat Channel Webinar on Willfulness and Enhanced Damages

Next Tuesday, June 26, from 2-3 p.m. Eastern Time the IP Chat Channel will be presenting a webinar titled Willfulness Since Halo.  I will be one of the speakers.  Here is a link, and here is the description:

Enhanced damages for patent infringement no longer is a rarity in the two years since the Supreme Court lowered the bar for alleging and proving willfulness in its Halo decision. In just the last few months, Illinois federal judge Harry Leinenweber raised Chamberlain's $3.8 million trial verdict to $11.4 million after finding the conduct of a rival garage door opener maker to be egregious. In May Texas federal Judge Rodney Gilstrap found deliberate copying of a Whirlpool water filter design and awarded Whirlpool Corp. $3.8 million in enhanced damages on a $7.6 million verdict.

In this webinar, our expert panel will describe winning corporate strategy and litigation tactics in this new environment. Two of the panelists are litigators with recent courtroom successes involving willfulness issues -- and the third is a leading academic expert on patent law and damages. They will analyze recent case law at both district courts and Federal Circuit and describe:

• Current pleading standards for willfulness, including proving knowledge of the patent or willful blindness and the impact of letters of counsel

• The effect of Halo on the availability of pre- suit and post-suit willfulness and the impact of the timing of the notice of infringement

• The relevance of the Read factors (Read Corp. v. Portec, Inc., Fed. Cir. 1992) for egregious behavior in light of the fact that enhancement needn't always follow a finding of willfulness.

Panelists

Thomas Cotter is the Briggs and Morgan Professor of Law at the University of Minnesota School of Law in Minneapolis. Prior to joining academia, he clerked for the Hon. Lawrence Pierce, U.S. Court of Appeals for the Second Circuit, and worked in private practice. He is the author of the blog Comparative Patent Remedies and of a book of the same name(Oxford U. Press, 2013). Richard Megley is a founding partner of Lee Sheikh Megley & Haan, a Chicago IP litigation firm that launched in 2015. All the founders previously worked at Niro, Haller & Niro. Rich has won large damages and royalties for patent plaintiffs, and has led licensing campaigns that have brought in revenues of more than $75 million. This spring he succeeded in fending off enhanced damages at the Federal Circuit for client Drgem Corp., despite a jury finding of willfulness. Kathi Vidal is a patent litigator and the managing partner of the Silicon Valley office of Winston & Strawn. She has first-chaired many high-stakes litigations involving high tech companies. Earlier in her career, she worked as a systems and software design engineer at GE. This spring she won a jury verdict of willfulness for client Chamberlain Group in the Northern District of Illinois and enhanced treble damages from the judge.

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PwC 2018 Patent Litigation Study Is Out

Link here.  This year's study--titled simply 2018 Patent Litigation Study--is authored by Landan Ansell, Ronen Arad, Doug Branch, HyeYun Lee, Adil Pasha, and Paul Robinson, and it reports the following findings, among others, relating to U.S. patent litigation.  The study is based on decisions PwC identified as "final decisions at summary judgment and trial recorded in two Lexis Advance databases, US District Court Cases and Jury Verdicts and Settlements, as well as in corresponding docket entries from LexisNexis CourtLink" (p.18).  "Median damages have been adjusted for inflation to 2017 US dollars" (p.18).

1.  Using an October 1-September 30 year, patent cases filed were at their lowest level since 2011 (at approximately 4,000), while patent grants attained an all-time high of approximately 350,000 (p.2).

2.  The median damages award from 1998-2017 has been $5.9 million.  The median award in 2017 was $10.2 million (compared with $6.1 million in 2016), and $6.0 million for the period 2013-17 (p.5).  (If you're interested in comparing with previous years, see my posts discussing PwC's 2017, 2016, 2015, and 2014 studies.  For my discussion of Lex Machina's 2017 Patent Litigation Year in Review, see here.) The report also states, however, that "[m]edian damages have been trending upward for the last 20 years when summary and default judgments are excluded," with a median of $9.2 million for 2013-17 (p.5).  The median award in jury trials from 2013-17 was $10.2 million, compared with $1.9 in bench trials (undoubtedly some self-selection going on here, though), and among practicing entities reasonable royalties continue to account for the majority of awards (60% reasonable royalties only, 19% lost profits only, and the remained a combination of both, for the years 2008-17) (p.6).  NPEs have achieved higher median damages awards from 2013-17 ($14.8 million, versus $4.2 million for practicing entities) (p.9).  Among NPEs, universities and nonprofits do best, with a median award of $16.6 million from 1998-2017 (compared with $11.8 million for "company" NPEs and $7.1 million for individuals) (p.10).

3.  The overall success rate for practicing entities from 1998-2017 is 37%, and for NPEs 25%.  For cases decided pretrial, practicing entities had a 16% success rate and NPEs a 6% success rate, whereas for cases ending with a trial the rates are similar (66% for practicing and 62% for nonpracticing entities) (p.8). From 2013-17, patent owners fared better with juries than with bench trials (74% versus 52% success rates) (p.7), with NPEs doing substantially worse in bench trials (36% success versus 54% for practicing entities; success rates before juries are comparable, at 72% and 76%, respectively) (p.8).  Among NPEs, universities have the highest overall success rate (47%, compared with 31% for companies and 18% for individuals) (p.10).

4.  The District of Delaware has overtaken the Eastern District of Texas as the leading venue for patent infringement actions (pp. 14-15).

5.  The study reports that "the likelihood of a willful infringement finding increased after Halo v. Pulse"--the Supreme Court's June 13, 2016 decision that makes it somewhat easier for the trier of fact to conclude that the infringement was willful, and therefore potentially deserving of an award of enhanced damages--but that "the average enhancement multiplier declined" from 2.1 to 2.5 times the actual damages (p.17).  The report doesn't specify the time frame it is using, however, though I would guess that if the study's statistics go through the end of September 30, 2017, it's describing cases decided from the date of Halo through that date, and for a comparable period preceding Halo.  In any event, the number of requests hasn't gone up a lot (from 42 to 46), but the percentage finding willfulness has increased from 36% to 54%, which would translate into an increase of 15 to 25 cases.  But again, the average enhancement has actually gone down a bit (p.17).

Yelderman on Proximate and Geographic Limitations on Patent Damages

StephenYelderman has posted a paper on ssrn titled Proximate v. Geographic Limits on Patent Damages, 7 IP Theory (2018)  Here is a link, and here is the abstract:

The exclusive rights of a U.S. patent are limited in two important ways. First, a patent has a technical scope—only the products and methods set out in the patent’s claims may constitute infringement. Second, a patent has a geographic scope—making, using, or selling the products or methods described in the patent’s claims will only constitute infringement if that activity takes place in the United States. These boundaries are foundational features of the patent system: there can be no liability for U.S. patent infringement without an act that falls within both the technical and geographic scope of the patent.

Once liability has been established and a court’s attention turns to remedies, the continued relevance of these boundaries is not so clear. If all the infringing activity and all the resulting harm are within the technical and geographic scope of the patent, there is no problem. But, sometimes, activities within the technical and geographic scope of a patent cause harm to the patentee somewhere outside that scope. For example, a defendant’s infringing sales of a patented product may cause the patent holder to lose some sales of an unpatented product too. Or, as another example, a defendant’s infringing activity in the United States might cause a patent holder to lose sales somewhere else. Are these harms—to sales of a different product, or in a different country—cognizable for purposes of measuring the patent holder’s damages? Or do the basic limits on patent scope apply to questions of remedy just as they do to questions of liability?

This Essay argues that the same approach adopted at the edge of technical scope should apply at the geographic boundary as well. Specifically, patent holders should recover for the injuries actually and proximately caused by domestic acts of infringement, even if those injuries arise outside the technical or geographic scope of the patent. The Federal Circuit has correctly decided cases in which damages fall across the line of technical scope, but erred when it comes to damages that happen to cross a geographic boundary.

This short essay (12 pages) is definitively worth a read.  The analysis is reminiscent of the arguments Professor Yelderman made in his WesternGeco amicus brief, which I found persuasive (see discussion here).

Perhaps we'll be hearing from the Supreme Court on WesternGeco next week . . .

Some Interesting Policy Questions Posed by Recent French Damages Decision

The case is Hutchinson SA v. CF Gomma Barre Thomas SA, Cour de Cassation, ch. comm., Mar. 21, 2018, PIBD No. 1093, III, 290.  The case involves EP 0 6 910 481, for improvement in rods connection certain vibrating parts of vehicles to the bodies of such vehicles.  Hutchinson is the owner of the patent, which it exclusively licensed to co-plaintiff Paulstra SNC.  The court affirms a finding of liability with regard to certain products, but also affirms the denial of damages to Hutchinson on the ground that it did not substantiate its loss.  Hutchinson declined to offer evidence of the revenue it derives from Paulstra (which is an affiliated company of Hutchinson, as well as the latter's exclusive licensee), and of how much of this revenue is attributable to the patent in suit.  The court also concludes that a license negotiated, post-injunction, with (if I'm understanding this correctly) another (co-defendant) firm that took over the management of the defendant's affairs as a result of a reorganization, was not probative.  Finally, the court affirms a judgment of lost profits awarded to Paulstra, which apparently was based in part on the sales revenues earned by the defendants, on the ground that the resolution of this matter was within the discretion of the Court of Appeals.  

The case poses some interesting policy questions, in my view.  First, as I discuss here at pp. 19-20, as a matter of policy it isn't clear to me whether a court should do its best to award some sort of royalty when the parties' evidence falls short, or deny damages altogether.  The latter was Judge Posner's view in Apple v. Motorola, but the Federal Circuit thought otherwise; and this also appears to be the view among the German courts, which generally make an effort to award something by application of their “free discretion” (nach freier Überzeugung).  Second, on the issue of what damages to award the patentee/exclusive licensor, see this article by Mark Lemley, stating (at p. 673) that "In my view, a patentee who has granted an exclusive license should stand in the shoes of the exclusive licensee; if the exclusive licensee has lost profits because of infringement, those losses should be compensable in a suit by either or both parties, divided as per the agreement between them," but also noting that Federal Circuit case law appears to the contrary.  Third, without using the term "holdup," the court appears to recognize that a settlement entered into after entry of an injunction may not provide a good reflection of the value of the patented technology.  For previous discussion on this blog, see, e.g., here.  Finally, for discussion of whether the defendant's sales revenue can ever be a good-enough heuristic from which to infer the plaintiff's lost sales and hence lost profit, see again this article, at p.25.

From Around the Blogs: Damages in Canada and France, Injunctions in the U.K., and More

1.  On Sufficient Description, Norman Siebrasse has published a post titled Compound Interest is Here to Stay.  The post provides a detailed discussion of a recent Federal Court decision, Grenke v. DNOW Canada ULC, which (in addition to awarding compound interest, as per the the title of the post) addresses the calculation of lost profits and reasonable royalties, and denies a request for punitive damages.  Highly recommended. 

2.  On the EPLaw Blog, Pierre Véron has published a post titled FR – Novartis v. Teva / Valsartan – €13,000,000 advance on damages, discussing a recent case in which the Tribunal de grande instance de Paris awarded a preliminary injunction and €13,000,000 as an advance on damages.  M .Véron notes that "[t]his is probably the highest amount ever granted by a French court as an advance payment on damages in a patent infringement case," and provides a copy of the decision (in French) here.  Also on the EPLaw Blog recently, Olivia Henry published a post titled UK – Edwards Lifesciences v. Boston Scientific Scimed, about an English case staying an injunction, which also was recently discussed on IPKat and on this blog here.

3. On the IAM Blog, Timothy Au has published a post titled Fear about massive PAE litigation abuses in Europe is unfounded, new report concludes, discussing a  report authored by Igor Nikolic and published by the 4iP Council titled Are PAEs a Threat to Europe?  The abstract of the report itself reads as follows:

Patent Assertion Entities are often negatively portrayed as harmful “patent trolls” that engage in speculative and abusive patent litigation against manufacturing companies. Although mass PAE litigation has mainly been US phenomenon, a recent study indicated that PAEs are on the rise in Europe and a number of changes to the European patent and litigation system have been recommended. This paper provides a different perspective on PAEs. It will first show that not all PAEs engage in harmful activities and that most are in the legitimate business of patent licensing. Further, Europe has in place different patent and litigation incentives than the US, which effectively guard against any abusive patent litigation. Finally, the available evidence does not in fact show the presence of mass and harmful PAE litigation in Europe.

4.  On Patently-O, Dennis Crouch published a post on Huang v. Huawei, a nonprecential opinion handed down by the Federal Circuit last week affirming a grant of attorneys' fees against a pro se litigant.  This morning, by contrast, the Federal Circuit published a precedential opinion affirming a judgment denying attorneys' fees in Stone Basket Innovations, LLC v. Cook Med. LLC.  The opinion is fairly fact-specific, but basically holds that the district court did not abuse its discretion in denying fees in a case in which the patentee voluntarily dismissed its suit following institution of an IPR, and requested entry of an adverse judgment before the PTAB after the IPR was instituted.

"Patent Wars" Is Now Available on Kindle and Nook

My new book, "Patent Wars: How Patents Impact Our Daily Lives," is now available on Kindle and Nook.  Hardcover copies can be pre-ordered from Amazon, B&N, OUP, and other sources, and will be available on July 2.  Meanwhile, read it as an eBook, or view excerpts on Amazon's website. Reviews on Amazon and B&N are welcome; alternatively, anyone interested in writing a review for publication may request a review copy from OUP here.  For my author page on Amazon.com, click here.

 

From the back cover:

"Patent Wars is a big-picture look at how patents impact the cost and speed of technological innovation - and thus our everyday lives - written by a legal scholar who understands the patent regime down to its nitty-gritty details. Thomas Cotter weaves together compelling stories and sound economic reasoning for an enlightening introduction to some of patent law's most contentious and high-profile controversies." - Kevin Emerson Collins, Professor of Law, Washington University Law School

"Patent disputes increasingly dominate the news and affect our daily lives, from access to life saving drugs and diagnostic tests to battles over mobile phones and other vital platform technologies. Professor Thomas Cotter provides a sophisticated, balanced, and readable survey of the patent system that will illuminate patent specialists, scientists, engineers, students, and the general public alike. By demystifying the most salient patent controversies, Patent Wars offers valuable insights into the important roles that patents play in the Information Age." - Peter S. Menell, Koret Professor of Law and Director, Berkeley Center for Law & Technology, University of California-Berkeley

"The patent system touches almost every life in innumerable ways, yet it remains opaque and mysterious. Written by a renowned specialist in the intellectual property field, this book explains, in crystal clear language, both the basics of this system and the way it continues to impact crucial contemporary technologies, from DNA to cell phones. Thomas Edison famously invented (and patented) the light bulb, but after you have learned from the entertaining and deeply knowledgeable Professor Cotter, you will never again be in the dark when it comes to this most interesting and important part of the law." - Rob Merges, Professor of Law, University of California-Berkeley

JPO Guide to Licensing Negotiations Involving SEPs

As I mentioned on Wednesday, the JPO has now released its Guide to Licensing Negotiations Involving Standard Essential Patents.  I've read through the Guide, and in my view it succeeds, as its drafters intended, in presenting "a broad range of information and opinions" regarding SEP/FRAND negotiations, "identify[ing] the key issues, and present[ing] these in a balanced and straightforward manner" (p.48).  I don't have anything critical to add, other than that readers will find concise recitations of the leading arguments for and against the positions that have been asserted on all of the important issues (availability of injunctive relief, damages calculation methodology, etc.), with cites to the relevant cases from Japan, the U.S., and the E.U.

Cui on the Guangdong SEP Guidance

Yesterday I published a short post on the Guangdong High People's Court Guidance for SEP Disputes.  This morning I noticed a detailed post on the subject by Yabing Cui, which I commend to readers' attention.  (It includes a link to the Guidance itself, in the original Chinese.)

In addition, on Written Description this morning Michael Risch posted some interesting observations on the Apple v. Samsung design patent verdict.

Now back to reading the JPO's recently-issued SEP Guide, so I can provide some comments on it later this week . . . .

Japan Patent Office Releases Guide to Licensing Negotiations Involving SEPs

Yesterday the Japan Patent Office (JPO) released its Guide to Licensing Negotiations Involving Standard Essential Patents.  (See webpage here; direct link to the English translation, here.)  After I have had a chance to read it, I hope to return with some comments.  For previous discussion on this blog, see here.

Hat tip to Professor Masabumi Suzuki for bringing this to my attention.

Guangdong Court Issues Guidance on SEP Disputes

Hat tip to Jill Ge, who noted this article by Adrian Emch, Katie Feng, and Qing Lyu earlier today on Twitter.  According to the authors, "[t]he Guidelines in Guangdong do not deviate too much from the Beijing Patent Guidelines, indicating that a consistent approach may be taken by major courts across China" with regard to injunctive relief.  (For previous discussion on this blog of the Beijing Guidelines, see here.)  However, according to the authors, the Guangdong Guidelines also provide some guidance on royalty determinations, including an endorsement of the top-down approach and of the setting of worldwide  rates under some circumstances.

If any readers have access to a copy of the Guidelines themselves, or better yet a translation into English, please send them my way.

From Around the Blogs: Injunctions in the U.K., China, and India; Confidentiality and FRAND in Germany

1.  On EPLaw this morning, Rachel Mumby and Ben Millson published a post titled UK--Regeneron v. Kymab and Novo Nordisk, discussing a recent decision of the Court of Appeal for England and Wales regarding the scope of an order for injunctive and other relief (copy of opinion here).  The order, among other things,  (1) exempts the defendants from delivering up a quantity of the infringing products (mice, cells, antibodies) that will be used for purposes exempted from liability under U.K. law; and (2) stays the injunction and delivery up pending appeal to the U.K. Supreme Court, on the ground that Kymab faces the risk of irreparable harm that outweighs the harm faced by Regeneron (see paras. 45-62 of the opinion).  Interesting post and opinion, particularly in light of my blog post last Monday on stays of injunction in the U.K.

Also on EPLaw, Alexander Haertel and Jonas Block last week published a post titled DE--Confidentiality Roulette in Proceedings.  The post discusses an April 25, 2018 decision of the Oberlandesgericht Düsseldorf, setting forth the conditions under which an intervenor in a patent case will be allowed access to allegedly confidential business information disclosed to other parties under a nondisclosure agreement.  The authors believe that the effect of the decision will be that, in FRAND cases in particular, patentees will have a difficult time shielding comparable licenses from being reviewed by defendants and intervenors.  Definitely worth a read. For previous discussion on this blog, see here.

2.  On the Kluwer Patent Blog, Hui Zhang, Mengling Liu, and James Yang have published a ver informative post titled Beijing High Court upholds China's first-ever SEP injunction in Iwncomm v. Sony.  The authors express hope that the Supreme People's Court will grant review to clarify some of the issues presented.  For previous discussion on this blog, see here and here.

3.  On Spicy IP, Adarsh Ramanujan has published a post titled Understanding the Public Interest Element of the Injunction Analysis in Patent Infringement Cases.  This is a very interesting post, highlighting the differences between and among India, the U.K., and the U.S. in evaluating the public interest factor, particularly in the case of health care related inventions.  For previous discussion on this blog, see, e.g., here and here.

Some New Papers on SEPs

1. Jorge Contreras has posted on ssrn his "Comments Submitted to Japan Patent Office on Guide to Licensing Negotiations Involving Standard Essential Patents."  Here is a link, and here is the abstract:

These comments were submitted to the Japan Patent Office (JPO) in response to its request for comments on its Guide to Licensing Negotiations Involving Standard Essential Patents (Draft Mar. 9, 2018). These comments relate primarily to:
(1) assertion of SEPs by Patent Assertion Entities,
(2) confidentiality of information in SEP negotiations,
(3) Bottom-up royalty calculations, and
(4) exclusivity. 

The comments are only five pages long, and well worth reading; Professor Contreras makes some valuable points.  For more on the JPO's request for comments, see here.

2.  Jorge Padilla, Judge Douglas Ginsburg, and Koren Wong-Ervin have posted a paper on ssrn titled Antitrust Analysis Involving Intellectual Property and Standards: Implications from Economics, forthcoming in the George Mason Law Review.  Here is a link to the paper, and here is the abstract:

There is a significant industrial organization (IO) economics literature on the economics of innovation and intellectual property (IP) protection. As some courts and antitrust agencies have recognized, the IO economics toolkit for business arrangements (e.g., vertical restraints, tying and bundling, etc.) involving IP rights is sufficiently flexible to be applied in high-technology areas involving antitrust and IP. In this Article, the authors explain the economics of innovation and IP protection, licensing, and compulsory licensing, with specific applications to standards development and to standard-essential patents. The authors then propose first-best approaches based on the implications of the economics that courts and agencies can apply at each stage of an antitrust inquiry, from market definition and market power to the assessment of particular business practices. The authors conclude by providing a summary of the approach applied in each major antitrust jurisdiction—China, the European Union, India, Japan, Korea, and the United States.

3. Christopher Weber and Katharina Brandt have published a paper titled Salomonische Kommission?  Die Mitteilung der EU zu Standaresseziellen Patenten, ("Solomonic Commission?  The EU Communication on Standard-Essential Patents") in the April 2018 issue of Mitteilungen der deutschen Patentanwälten (pages 153-56).  Here is the abstract (my translation):

The enforcement of standard-essential patents in the gray area between patent and competition law has occupied courts and authorities for years.  More than two years since the groundbreaking decision of the CJEU in Huawei v. ZTE, the European Commission has now expressed itself on how these patents should be handled.  In its Communication, the Commission not only invites stakeholders to work on improving documentation and declaration practice, but also formulates recommendations for action on the (currently controversial) problems that  result from the handling of standard essential patents.  

This issue of Mitteilungen der deutschen Patentanwälten also includes a commentary by Dr. Annette Anette Gärtner on the March 30, 2017 decision of the Düsseldorf Oberlandesgericht in a SEP case, No. I-15 U 66/15, previously noted on this blog here.  For my previous post on the European Commission's November 29, 2017 Communication on SEPs, see here.